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FHA Maximum Financing Calculator

Homebuyers May Qualify for a Low-rate FHA Home Loan

Visit FHALoans.com today to prequalify.

This calculator helps determine the minimum allowable down payment and maximum FHA mortgage allowed on a home purchase. It creates an estimate of closing costs and required upfront Mortgage Insurance Premium (MIP). This tool is designed to determine the FHA mortgage limit for a particular purchase, not the maximum allowed for any home in your state and county. To determine the maximum purchase price for your specific area you should use https://entp.hud.gov/idapp/html/hicostlook.cfm at the HUD.gov. Then, with that data in hand, use the below calculator to determine the required down payment, FHA mortgage limit and required upfront Mortgage Insurance Premium (MIP).

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Current Local FHA Mortgage Rates

Here is a table listing current FHA home loan rates in your area.

Calculating the Max Amount for an FHA Backed Loan

The U.S. Department of Housing and Urban Development (HUD) has been has been helping first-time homebuyers get loans backed by the Federal Housing Administration (FHA) since 1934. Traditional lenders such as banks issue the loans, but they are insured by the FHA, reducing the risk to the lender and allowing the lender to provide better terms.

FHA loans require low down payments — typically only 3.5 percent — and low closing costs, many of which can be included in the loan. The FHA also offers loans that allow you to purchase a home in need of repairs and to roll the cost of the fixes into the primary mortgage loan. Other loans are available for seniors, for those looking to make energy improvements to their home, and for those who want to buy manufactured or mobile homes.

Another part of what makes FHA loans so attractive to first-time homebuyers is that they have easy credit qualifying. If you don't have a perfect credit score, but you have a good history of paying your bills on time, you will likely qualify for an FHA loan.

FHA Loan Calculation

Though FHA loans offer some flexibility for first-time homebuyers to help them afford a new home, it can be confusing trying to figure out just how much you can borrow under an FHA loan because of all the criteria involved with the loan.

The above FHA maximum financing calculator makes it easy for you to understand just how much you can borrow. Enter in all the variables, including the sales price of the home you wish to buy, the appraised value of the home, borrower-paid closing costs, prepaid expenses, discount points, any repairs or improvements you wish to make and include in the cost of the loan, and your mortgage insurance premium. We'll send you fast results including the cash required at closing and how much you are able to purchase.

Just enter your e-mail and have your results delivered in moments, including a plain-English explanation with everything you need to know about your borrowing options.

Benefits of the FHA Loan Program

Although it is true that there are several different types of mortgages making a comeback, the FHA remains one of the most popular. The reasoning behind this is the multiple benefits an individual is eligible for once they qualify for this loan.

Gift Funds. The FHA is one of the only lenders that are very proactive in protecting their applicants' ability to accept monetary gifts for payments. An applicant can accept up to 100% of the downpayment in the form of a gift from a relative, friend, employer, charitable group, or government homebuyer program. You will have to follow the process to accept the gift though.

Low Downpayment. One of the biggest draws to this program is the low downpayment amount. Most down payments are around 10% or higher. However, the FHA program offers down payments for as low as 3.5%. This means buyers don't have to worry about saving as much for their down payments, and they can save their money for repairs of emergency funds.

Many Property Types are Eligible. Unlike several mortgage lenders, the FHA is flexible on the property types that are eligible for financing. Borrowers can purchase a home in any neighborhood located in the United States, the District of Columbia, or any territory the United States holds. You can purchase a single family home, two unit homes, three and four unit homes, condominiums, mobile homes, and manufactured homes.

No Social Security Number Required. Every homebuyer does not have a social security number. Normally, this would be something that prevented them from purchasing a home. The FHA will allow people without a valid social security number to secure a loan. This is good news for employees of the World Bank, employees of Foreign Embassies, and non-resident aliens.

Comparing FHA Home Loans to Conventional Mortgages

Conventional Mortgage

FHA Mortgage

Credit Score

640 and Up

560 and Up

Down Payment

5% to 20%

3.5% to 10%

Interest Rates

Higher

Lower

Refinancing

Requires a Credit Check

Streamlined, no Additional Credit Check Required

Max Loan Amounts

$484,350 in Most Areas, Up to 50% More in High-cost Areas

115% of the Area's Median Home Prices

Owner Occupied

Not Mandatory

Owner Must Reside at the Property for Certain Home Styles

Down Payment Assistance

None

SETH, TDHCA, and TSAHC Available

Assumable

No

Yes

Allow Gifting

Yes, Only a Portion of the Down Payment

Yes, up to 100% of the Down Payment

2019 FHA Loan Limits

The FHA sets caps on what you can borrow based on where you live or where you intend to purchase a home. These loan limits are based on the average price of a home in your area and on the type of home it is, including single family, duplex, triplex and four-plex.

For example, the limit for a single-family home in Alamance County in North Carolina is $314,827, while the limit for a duplex in the same county is $403,125.

In 2018, the FHA announced that it would increase the loan limits for the program in response to rising house costs. In more high-cost areas of the United States, it would increase to $726,525. Additionally, the lower end would increase to $314,827. The increase for any FHA-insured reverse mortgages would increase to $726,525. These increases for 2019 reached 3,053 counties nationwide & followed increase in 2016, 2017 & 2018.

These increases are based on a formula derived from the conforming mortgage limit of $484,350. The low end floor is set to 65% of the conforming loan limit, while high cost areas have a ceiling set to 150% of the conforming loan limit. In 2019 2,657 counties will be at the floor, 73 columns will be at the ceiling & 504 counties are in between.

Loan limits vary significantly depending on where you intend to purchase a home. For example, the loan limit for a single-family home in New York County in New York is $726,525. Only a couple percent of counties are at the ceiling, while thousands of counties are at the floor.

2019 FHA Limits

#

%

FY 18 Endorsements

% of End

Amount

% $

Average Loan

Counties at Ceiling

73

2.26%

79,639

7.85%

$29,085,594,869

13.91%

$365,218

Counties in Between

504

15.58%

442,109

43.57%

$102,074,625,753

48.83%

$230,881

Counties at Floor

2,657

82.16%

492,860

48.58%

$77,890,616,723

37.26%

$158,038

If you want to know what your local FHA loan limits are, click here. This interactive tool will show you the local FHA limits in your area. You can narrow it down by state and county. A table highlight 2019 FHA loan limits is published below

Location

Limit Set @

1 Unit

2 Units

3 Units

4 Units

Low Cost Area

65% of conforming limit

$314,827

$403,125

$487,250

$605,525

High Cost Area

150% of conforming limit

$726,525

$930,300

$1,124,475

$1,397,400

Alaska, Hawaii, Guam & Virgin Islands

$1,089,787

$1,395,450

$1,686,700

$2,096,100

FHA Cash Out Refinance Loan Limits

Homeowners who have an FHA backed loan are able to withdraw up to 80% of their home equity, which is a 5% reduction from the prior 85% limit. HUD announced the new lower limit on August 1, 2019 to help limit risk in the mortgage marketplace & ensure homeownership helps homeowners build wealth.

Other Requirements

Loan limits are just a starting point for determining how much you can borrow with an FHA loan. As with other home loans, FHA loans require lenders to meet guideline for housing expense ratios and debt-to-income ratios.

Traditional mortgages require that your total monthly mortgage payment not exceed 28 percent of your monthly gross income, and that your total monthly debt payments — including your mortgage, car loan, student loans and other obligations — not exceed 31 percent of your gross monthly income. However, the FHA increases these limits, allowing you to have a 31 percent housing expense ratio and a 43 percent total debt-to-income ratio. You can find these ratios by dividing your monthly mortgage payment by your monthly income, or by totaling up your monthly debt payments and dividing them by your monthly income.

FHA loans also require that you carry mortgage insurance, which is included in your monthly mortgage payment. The more expensive the home you buy, the more expensive the mortgage insurance will be.

Like other loans, you are also required to carry homeowners insurance, which includes paying the premium at closing, and to pay your property taxes in escrow.

FHA Qualification Requirements

Credit Scores

Many lenders like to see credit scores in the mid-700s and higher. The FHA has lower credit score requirements, and this makes it more accessible to more people. It is good to know that your down payment will largely depend on your credit score. You can qualify with a 580 or higher FICO score and still be eligible for the 3.5% down-payment. However, if your score is below 580, you could still qualify, but you could be subjected to up to a 10% down payment.

The following table shows how the average FHA borrower credit score has changed in the recent past.

Year

Average Credit Score

2018

670

2017

676

2016

680

2015

680

2014

682

2013

693

2012

698

2011

701

2010

697

2009

681

2008

647

2007

630

2006

641

2005

639

DTI Ratios

Loan limits are just a starting point for determining how much you can borrow with an FHA loan. As with other home loans, FHA loans require lenders to meet guideline for housing expense ratios and debt-to-income ratios.

After the recession credit standards tightened to where traditional mortgages required that total monthly mortgage payment not exceed 28 percent of your monthly gross income, and that your total monthly debt payments — including your mortgage, car loan, student loans and other obligations — not exceed 31 percent of gross monthly income. In the years since the recovery began, these limits have lifted over time & borrowers can have a back-end ratio as high as 50%. However, the FHA increases these limits, allowing you to have a 31 percent housing expense ratio and a 50 percent total debt-to-income ratio. You can find these ratios by dividing your monthly mortgage payment by your monthly income, or by totaling up your monthly debt payments and dividing them by your monthly income.

FHA loans also require that you carry mortgage insurance, which is included in your monthly mortgage payment. The more expensive the home you buy, the more expensive the mortgage insurance will be. Like other loans, you are also required to carry homeowner's insurance, which includes paying the premium at closing, and to pay your property taxes in escrow.

People who have high debt-to-income (DTI) ratios typically find it hard to obtain financing.

Frontend DTI: You get your front end DTI ratio by comparing your monthly housing expenses against your income. For example, if your monthly income is $6,000 and a mortgage payment including home insurance costs $1,500, your front end DTI is 25%.

Backend DTI: You get your back end DTI ratio by dividing your monthly debts by your pre-tax monthly income. For example, if your monthly income is $6,000 and your monthly debt is $2,500, your back end DTI is 42%.

Frannie May and Freddie Mac traditionally have allow back end DTI ratios between 36 and 43%. In some cases The FHA allows up to 50% depending on your credit score. To better compete against FHA insured loans, both companies have expanded their DTI limits to 50% of pretax income in July of 2017.

In March of 2019 the FHA informed lenders they would tighten loan standards as their overall loan portfolio has grown more risky, a policy shift from the 2016 underwriting loosening which allowed automated underwriting for borrowers with a credit score below 620 or a DTI above 43%.

The following table shows the share of FHA borrowers whose debt payments exceed half of their income. The ratio has gone up more than four-fold since the turn of the century as non-bank mortgage lenders like Quicken Loans, loanDepot & Fairway Independent Mortgage have grown to a large share of the market.

Year

Share of Borrowers

2018

24.8%

2017

20.3%

2016

16.33%

2015

14.58%

2014

14.37%

2013

13.54%

2012

15.42%

2011

16.69%

2010

16.76%

2009

18.97%

2008

13.2%

2007

9.48%

2006

9.07%

2005

6%

2004

5.5%

2003

4.99%

2002

5.9%

2001

6.25%

2000

5.75%

Documentation

In the past few years, the documentation requirements have gone up for the FHA loan program. The more documentation you have, the better chances you have of getting approved for your loan. You'll need:

Appraisal Report

Credit Report

FHA Amendatory Clause

Form HUD-92900-A

Loan Application

Real Estate Certification

Sales Contract

SSN Verification (if applicable

Tax Return

Verification of Employment

Employment Verification

Ideally, the FHA lender would like to see at least two years worth of steady employment to qualify. If the applicant has changed jobs three times in the last year, the FHA will take further steps to verify the applicant's employment. They want to see a steady stream of income, and this helps them believe the applicant will be able to pay them back.

Comparing FHA, VA, USDA & Conventional Loans

Down Payment

Debt-to-Income

Minimum Credit Score

Mortgage Insurance

Loan Limits

Fixed or Adjustable Rates

Conventional Loan

5% to 20%

Up to 50%

640

PMI Not Required with 20% Down

$484,350 in Most Areas

Both Available

FHA Loan

3.5% to 10%

Up to 50%

560

0.8% to 1.05% for 30-yr loans, 0.45% to 0.95% for 15-yr loans

115% of the Area's Median Home Price

Both Available

VA Loan

0% to 5%

Up to 41%

620

No PMI, Upfront Funding Fee of 1.25% to 3.3% Depending on: Down Payment, Regular Military or Reserve Status & if 1st or Subsequent use

Varies by County Limits

Both Available

USDA

0%

Up to 41%

640 for streamlined approval, can be lower

1% Upfront, 0.35% Annually

Varies by County Limits

15-yr & 30-yr Fixed

To better compete with government insured loans, both of the major GSE have launched low downpayment loan options.

Freddie Mac has a Home Possible loan program which allows down payments as low as 3% to 5%, while Fannie Mae offers a HomeReady loan program that requires a 3% down payment.

Qualifying With No Credit History

Although you will technically have to have a credit score to qualify for a FHA loan, you can still qualify with no or extremely thin credit history. Lenders can look at nontraditional types of payments to establish an applicant's reliability. They'll look at things like rent payments, student loan payments, utility payments, or credit card payments.

Ideally, you want at least a year of reliable payments before you apply for an FHA loan. It is important to know that a lender may not reject an application simply because the applicant chose not to use credit in the past. No matter if you have traditional or nontraditional credit, your FHA loan officer will look into it when you apply.

Eight Factors to Help You Qualify

If you are on the edge or over the limit and you're worried about being approved for your mortgage, there are a few steps you can take. While these won't guarantee you your mortgage, they may help to increase your odds of getting approved.

Lenders understand that some things are simply out of your control, but there are several things you can control and you should be mindful of them when you're waiting to qualify or close on your FHA loan.

Don't make any random deposits into your bank accounts, and document each one when you make a deposit.

If you have more than one bank account, don't transfer big amounts between them. Keep them in one account if it's possible.

Wait to buy a new vehicle or to upgrade to a bigger lease.

If you get a cash gift, remember to fill out your gift paperwork before you accept it.

Don't quit or switch jobs in the middle of the loan process. You want lenders to see you as a good choice.

If you work at a salaried job, don't switch to a heavily-commissioned job. Remember, your loan paperwork is based on your previous income from your salaried position.

Don't fall behind on your bills or miss payments, even if you're currently disputing them.

Even if you get 20% off, don't open any new credit cards. This can skew your credit utilization ratio, and it can make your credit score drop.

Comparing Conforming Loans to FHA Loans

When it comes to conforming mortgages and FHA loans, there are several key differences that you have to take into consideration before deciding which one will make the most sense for you.

Bankruptcies

If you've filed for bankruptcy and you want to qualify for an FHA loan, you'll have to wait two years and you'll have had to re-established your credit within this two years.

A conforming mortgage normally requires a four-year period between successfully qualifying for a mortgage and a bankruptcy. You'll be expected to re-establish your credit inside of these four years. There are exceptions, and some lenders do accept a two-years instead of the more traditional four.

Credit Score

FHA loans don't concentrate on credit scores, but they look at the applicant's entire credit profile. If you're below a 580 credit score, the down payment amount increases from 3.5% to 10%. Typically, you do need a credit score of 500 or above to qualify.

Conforming mortgages look at credit scores, and the higher your credit score is, the less you'll pay each month for insurance. Additionally, most Conforming mortgages look for credit scores of 740 and above, but they'll typically accept a credit score of 620 and up.

Down Payment

Your FHA loans will require a 3.5% down payment, and this is for any property type. There is also an annual fee of 0.85% that gets added to this mortgage.

A Conforming mortgage by Frannie Mae or Freddie Mac can require a down payment as low as 3%. However, the loan amount can only go up to $417,000, and you must be a first-time home buyer.

Mortgage Insurance

The FHA loans come with a mortgage insurance premium (MIP) that lasts for the life of your mortgage. The 0.85% fee is added annually to your balance. There is also a 1.75% mortgage insurance premium added on upon closing the loan. This works out to $1,750 for every $100,000 you borrow and you can pay this either in cash or add it on to the total balance.

Conforming loans have private mortgage insurance (PMI) added to every loan where the borrower puts less than 20% down on the home. It works out to about 1.05% annually for a 30-year loan up to $417,000 with 3% down. However, you can pay this off in as little as two years. As soon as you pay the balance down to 78% of the home's purchase price, the PMI is removed.

Owner Occupancy

If you choose to get a mortgage through the FHA loan program, it will allow a non-occupying co-borrower to live in the home instead of the applicant or co-signer themselves.

A Conforming mortgage won't allow this practice, and this makes it harder to qualify. This means that if you have a co-signer, they must live on the property once the loan has gone through.

Popularity of FHA Home Loans

The low down payment requirement coupled with allowing looser credit standards than typical conforming mortgages makes FHA loans a widely popular option. In 2016 FHA loans represented 19.9% of home purchases, 10.9% of refinances & 15.8% of the total mortgage market. The following table shows how popular FHA loans have been over time.

Year

FHA Buy

FHA Refi

FHA Total

FHA Purchase *

Total Purchase #

FHA Refi *

Total Refi #

FHA Total *

Market Total #

1996

15.4%

5.8%

12.3%

696,504

4,524,674

123,475

2,146,882

819,979

6,671,555

1997

16.4%

6.8%

13.9%

758,967

4,624,352

109,546

1,608,195

868,513

6,232,547

1998

13.9%

6.8%

10.5%

787,703

5,656,199

348,044

5,138,962

1,135,747

10,795,161

1999

14.7%

4.1%

9.5%

913,216

6,226,372

244,578

5,955,905

1,157,794

12,182,277

2000

13.9%

3.9%

11.7%

844,835

6,074,004

65,987

1,692,510

910,822

7,766,513

2001

14.3%

7.4%

11.0%

869,524

6,100,159

407,424

5,526,541

1,276,948

11,626,700

2002

11.5%

4.0%

7.0%

764,453

6,624,756

411,781

10,296,778

1,176,234

16,921,535

2003

9.1%

3.6%

5.2%

630,119

6,954,384

652,853

17,932,247

1,282,972

24,886,631

2004

6.9%

3.3%

5.0%

467,293

6,791,344

248,428

7,527,744

715,721

14,319,088

2005

4.5%

1.8%

3.1%

322,915

7,233,456

133,261

7,251,637

456,176

14,485,093

2006

4.5%

2.0%

3.3%

295,261

6,563,679

115,859

5,765,899

411,120

12,329,578

2007

6.1%

4.2%

5.1%

317,181

5,222,266

211,093

5,071,725

528,274

10,293,991

2008

24.1%

15.6%

19.8%

844,893

3,508,103

560,767

3,583,680

1,405,660

7,091,783

2009

32.6%

14.8%

21.1%

1,088,356

3,338,302

896,558

6,052,223

1,984,914

9,390,525

2010

32.3%

9.5%

17.5%

944,159

2,925,707

518,571

5,432,837

1,462,730

8,358,544

2011

26.8%

6.6%

14.1%

760,352

2,837,237

321,847

4,848,733

1,082,199

7,685,970

2012

23.6%

7.4%

12.3%

738,227

3,129,414

526,635

7,124,752

1,264,862

10,254,166

2013

18.0%

9.7%

13.2%

664,944

3,694,162

507,010

5,217,051

1,171,954

8,911,213

2014

16.0%

7.1%

12.9%

601,335

3,751,328

181,871

2,551,037

783,206

6,302,365

2015

19.6%

11.5%

15.9%

811,092

4,131,364

409,517

3,555,550

1,220,609

7,686,914

2016

19.9%

10.9%

15.8%

890,565

4,476,326

412,779

3,794,919

1,303,344

8,271,245

* U.S. Department of HUD as of July 31, 2017. Originations based on beginning amortization dates.

# Includes all conventional and government single family forward originations. Mortgage Bankers Association of America, “MBA Mortgage Finance Forecast,” May, 2017, and Corelogic TrueStandings ® as of July 31, 2017.

In March of 2019 the FHA announced tightened underwriting standards, which is expected to impact about 4% to 5% of the demand for FHA-insured loans, leading to somewhere between 40,000 and 50,000 fewer loans a year.

FHA Mortgage Health Statistics

The FHA-type loan has had a history of dropping off and rising up again. As of 2013, the FHA mortgages are sitting at around 21%. The FHA mortgages experienced a large jump in popularity with Millennial buyers as people who were born between 1980 and 1999 are more predisposed to apply for FHA loans. Currently, 35% of Millennials have opted to use an FHA loan, and this percentage is way above the FHA's overall market share percentage of 21%. Nationally, the FHA backs around 16% of all mortgages.

Historically, this market share has experienced lows and highs for a number of reasons, and it's currently starting to go into a low point even with its popularity with the Millennial age group. The FHA's mortgage market share by dollar volume was just 17.3% in the last quarter of 2016. A few reasons for this share shift are:

Housing Bubble. During the housing bubble credit standards were loose on conforming mortgages. This meant marginal home buyers had less incentive to seek out FHA loans since almost anyone with a pulse could "qualify" for a standard conforming mortgage.

Housing Market Crash. The FHA offers mortgages to people with lower credit scores and thin credit histories. When credit dried up in the wake of the housing market crash & many ARM loans reset many people rushed into FHA loans.

Fee Adjustment. Once the United States housing bubble crashed, the liquidity people had access to was drastically reduced. This caused an FHA share boost after the crash and this. The slow recovery, in turn, caused the FHA default rate shoot up and any cash reserves that the FHA set aside for emergencies was quickly depleted. To offset the losses, in 2013 the FHA to increase its fees. The fee increase caused dollar share of FHA loans to slide as

many people defaulted

new borrowers preferred conforming loans which were in many cases cheaper on a relative basis

people with strong credit profiles who used FHA loans refinanced into conventional mortgages

Refinancing. Many FHA borrowers with significant home equity turned to different mortgages. Conforming mortgages offer private mortgage insurance that you can have removed as soon as you pay down to 78% of the property's purchase price, whereas FHA loans are now required to keep MPI throughout the duration of the loan. As loans age & homeowners build equity the conventional mortgage becomes a relatively better deal.

FHA's Equivalent to Private Mortgage Insurance

If you choose to go with a Conforming mortgage and you have a down payment of less than 20%, you'll be required to pay private mortgage insurance. This acts as a protection for the lender in the event that the borrower defaults, and it gets added to the individual's monthly payment.

The FHA also offers mortgage insurance, and they based their rates using the risk-based model. This means any applicants that are considered to be a higher risk of defaulting will pay more in insurance fees each month. Additionally, anyone who gets an FHA mortgage will pay an insurance premium of 1.75% when they close on the deal. They can either pay this out-of-pocket in cash or have it rolled into their premium.

For a 30-year loan with a minimum down payment of 3.5%, the annual insurance premium is currently 0.85%. If you have an FHA loan with a term of 15 years and you pay a down payment of 5.00%, your insurance premium is 0.70%.

Insurance Requirements

If you had your loan and insurance issued before June 3, 2013, your annual mortgage insurance premium will be automatically canceled on a 30-year loan as soon as it gets at or below 78% your property's total purchase price. You must also pay your mortgage payments for at least five years.

For a 15-year loan, the MIP will be automatically canceled when your total balance falls below 78% of your home's purchase value. There is no minimum waiting time for this loan like there is on the 30-year loan.

These guidelines only apply to your FHA loan if you had it on or before June 3, 2013. If you became qualified and got your FHA mortgage after this date, your mortgage insurance premium is permanent, and it won't automatically cancel. The only way out of paying it is to refinance your FHA loan into a conventional loan.

Refinancing Your Conventional Mortgage into an FHA Mortgage

If you're having trouble with your conventional loan, you can refinance it into an FHA loan. There are a few reasons someone would do this, and they are listed below.

Fixed Rate Terms. One of the most common FHA loans is the 30-year fixed-rate mortgage. If a person refinances from a traditional mortgage to the FHA program, they won't have to worry about their interest rates fluctuating. The fixed-rate mortgage will lock an interest rate in. and this can save the borrower money over the life of the loan.

Underwriting. The FHA offers much more flexible underwriting than traditional mortgages. This means that there is more flexibility when it comes to things like credit history, credit score, or missed payments. The FHA guidelines are commonly called common sense guidelines. For example, if a person has credit issues but they have higher household income or increased assets, the FHA will concentrate more on those factors than their credit history.

FHA Streamline Refinancing

The FHA offers a streamlined refinancing process for people who want to refinance their existing FHA loans. This program is sometimes called the FHA-to-FHA refinancing program, and it is the fastest and most simple way for FHA-insured homeowners to refinance their existing mortgages. This is because the original mortgage is already FHA backed, and this cuts out a lot of the refinancing process. By refinancing with this streamlined process, the borrowers get better rates on their loans, and it reduces the risk of default.

No Appraisal

Streamline refinancing doesn't require a home appraisal because you've already had one appraisal, and the FHA assumes the original price is still current. This applies even if you owe double the amount that your home is currently worth. The FHA will refinance your existing loan without any additional cost to the borrower.

No Additional Credit Check

The first time you apply for your FHA loan, the FHA-backed lender will look at your total credit file to decide if you're eligible for the mortgage or not. When you refinance, they won't look at your credit history again. This will reduce the time the refinancing process takes, and get the borrower their new terms quicker.

No Documentation or Employment Check

Since the lender checked your employment history and all of your documentation the first time you applied for the FHA program, they won't do it again for your refinance. They assume nothing has changed, and this works to speed the entire process up.

Streamline Refinancing Eligibility

If you want to refinance your current FHA mortgage with the streamline refinancing program, there are a few eligibility requirements you will have to meet.

Mortgage Age. Your mortgage must be 'seasoned.' This means it must be at least 210 days old, and the past six payments have to have been on time. This means your mortgage payment had to be paid within 30 days of the original due date.

Mortgage Payment History. At the time of your refinance request, you must be current on your mortgage payments and you must have made the past six payments within 30 days of the due dates. Additionally, if you were late, you can only be late once in the past year.

Net Tangible Benefit. Your net tangible benefit means that you have to prove that a refinance will leave you in a better place than you are with your current mortgage. For a fixed-rate mortgage, the net tangible benefit is defined as lowering your combined rate by at least 0.5%.

Refinancing Your FHA Mortgage Into a Conventional Mortgage

If you don't want to pay your MIP for the life of your loan, or you think you'll get a better deal, you can refinance your FHA mortgage into a Conventional mortgage. This has the potential to lower your overall costs and save you money over the life of your loan.

When you refinance out of your FHA mortgage into a conventional mortgage, you're doing so to get a few benefits that you wouldn't have with your FHA mortgage. These can include:

Homes Available for FHA Financing

The FHA is very flexible about the types of homes you can purchase with the program. A single family home, two unit homes, three-unit homes, four-unit homes, condominiums, mobile homes, and manufactured homes are all eligible.

Single Family Home. A single family home is a house that your purchase for one family to reside in. There is only one home located on the property.

Two-Unit Home. A two-unit home is a property where two residences are located. This type of home could be a duplex, the main home and a carriage house, mother-in-law suits, and in-law units.

Three and Four-Unit Homes. A three and four-unit home is a property that has three residences located on it. Triplexes and quads would be a good example of this. However, you will have to reside in one of the residences with these types of units.

Condominiums. You can purchase a condominium with your FHA loan as long as it meets the HUD's eligibility requirements. You can check the requirements and master list by clicking here.

Manufactured/Mobile/Modular Homes. Your FHA loan will cover the costs of purchasing a manufactured/modular or mobile home. The home must be built after June 15, 1976, and meet the Federal Manufactured Construction and Safety Standards.

FHA Loans are Assumable

If you have a loan through the FHA program and you sell your home before you pay it off, you can offer the potential buyer the right to assume your FHA loan. Once the FHA approves the buyer, the former borrower is released from all of their obligations and liability. It's like the new buyer had the FHA loan to begin with.

If your FHA loan originated before December 1, 1986, you are eligible for the FHA's simple assumability process. The simple process means that the FHA isn't required to approve the new lender, and it speeds up the process. If your FHA loan originated after this date, the FHA is required to check the new buyer's creditworthiness.

People Who Could Benefit From Using the FHA Program

While there are all age groups that qualify for and use the FHA program, there are a few groups that are drawn to this program.

First-Time Homebuyers

Since the FHA program doesn't require a large down payment, many first-time homebuyers use this program. It allows them to save up for emergency funds or various other expenses. As of 2015, it was estimated that around 75% of the people who had an FHA loan were first-time homebuyers. It isn't unusual to get a down payment as low as 3.5%, and this works to save the borrower money. Additionally, there are less stringent qualification guidelines.

Millennials

Millennials are another large group of people that seem to be drawn to the FHA program as well. The fact that you can use the FHA program for a variety of homes, the alternate credit requirements, and the low down payments attract the younger generation. In 2017, over 35% of Millennials who purchased a home used the FHA program to secure financing.

The Beginnings of the FHA

In 1934, the United States was starting to recover from the Great Depression, and around one in four people found themselves renting their homes instead of buying them. The Federal Housing Administration (FHA) was established to get more people owning their homes quicker.

In 1934, getting a home mortgage was a difficult process as credit standards tightened in response to the stock market crash of 1929 & the ongoing great depression. The individual who wanted to obtain the home loan had to pay up to 50% of the loan's cost as a down-payment. Additionally, the mortgages usually came with five-year balloon payment terms. This would be a hard loan to obtain today, and it was nearly impossible by 1934's standards.

The government wanted to increase the number of people who owned their homes. To do this, they introduced the FHA loan program. The government believed that the more people who owned their homes, the more stable neighborhoods would be, and the quicker the economy would improve.

The FHA loan program came with its Mortgage Insurance Premium program, and this program insured lenders against any 'bad' loans. Once the FHA program caught on, people saw mortgage rates dropping, the requirements dropped, and the traditional five-year mortgage was replaced with 15 and 30-year terms. Today, the FHA is the biggest mortgage lender in the world.

Other FHA Programs

In addition to the standard & widely popular FHA home loan programs, the FHA also insures loans for home repairs & reverse mortgages. Both programs are explained below.

FHA 203(k) Loans

This loan allows you to take out one loan for a dual purpose. You buy the home with the loan money, and you have money set aside from the same loan to renovate or improve the home you bought.

FHA 203(k) Loan Basics

Credit. Your credit doesn't have to be perfect for you to be eligible for this loan. The reasoning for this is the FHA protects the lenders in the event of you defaulting on the loan. You will have to prove that you have enough income to cover the payments, and you want your debt-to-income ratio should be at or better than 31/43.

Eligibility. To be eligible for this loan, you may be an owner, an occupant, or a nonprofit organization. If you're an investor, you won't be eligible. The home in question has to be a one to four until dwelling. Condos and townhomes can use the money only for interior repairs.

Repairs. You borrow enough to buy the house and to make improvements. Since the FHA backs this loan, more lenders would be willing to move forward with financing a property they normally wouldn't finance.

Temporary Housing. While your home's repairs are ongoing, you'll need somewhere to stay. You may be eligible to borrow extra money to cover your rent or mortgage payments for up to six months.

Overview

Once you've applied and gotten the funding, you have six months to complete any and all repair work you intend to do in your home. The repair money is put into an escrow account, and the contracting crew will be paid as they complete the work. Your contractor should be familiar with how the 203(k) process works before you decide on them.

FHA 203(k) Details

The minimum loan requirement is $5,000, and the maximum limit has a cap that varies by your location. If you're purchasing a simple single-family home, you'll fall between these limits. If you have smaller projects, there is an additional Streamlined 203(k) program available. The interest rate varies by your credit score, but you should expect to pay 1% or slightly higher than you would on a standard loan. Additionally, they have both fixed and variable rate loans available. As of January 1, 2017, the FHA raised the limits on the HECM loans. The HECM loan has a maximum limit of $679,650.

HCEM Loans

The Home Equity Conversion Mortgage (HECM) is a reverse mortgage plan that is designed for homeowners that are 62 or older. You'll apply and get this loan, and it is put on the senior's home as a lien. The senior is paid proceeds over time, and as long as the senior lives in the home, there are no repayment obligations.

Servicing Fee. This servicing fee will go throughout the life of the loan. This fee is capped at $30 or $35 per month. This fee is set aside by the lender and deducted from any funds you have available. The lender will add this fee to your balance each month.

Comparing HECM Reverse Mortgages to Standard Mortgages

Overview

HECM Reverse Mortgage

Standard Mortgage

Purpose

Provide funding to existing homeowner of advanced age

Makes to possible to purchase a house

Eligibility

62 or older, Equity in the owner-occupied home, Demonstrated the ability and willingness to pay the property taxes and insurance

Ability to make the required payments, Able to make the required down payment, A steady credit history

Lender Protection

Property collateral only

Borrower’s ability and willingness to repay the money and Property collateral as backup